[FRONT COVER OF PROXY]
SCI SYSTEMS, INC.
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
TO BE HELD OCTOBER 22, 1999
To the Shareholders of SCI Systems, Inc.:
Notice is hereby given that the 1999 Annual Meeting of Shareholders of SCI
Systems, Inc., a Delaware corporation, will be held at 10:00 A.M., Eastern
Daylight Savings Time, on Friday, October 22, 1999, at The Ritz-Carlton Hotel
(Buckhead), 3434 Peachtree Street, N.E., Atlanta, Georgia 30326 (the Meeting),
for the following purposes:
(1) to elect two Class III Directors to serve for a term of three years;
(2) to act upon a proposal to ratify the selection of Ernst & Young LLP
as the Company's independent auditor or the fiscal year ending
June 30, 2000; and
(3) to transact such other business as may properly come before the
Meeting and any adjournment or postponement thereof.
The Board of Directors has fixed the close of business on September 13,
1999, as the Record Date for the determination of shareholders entitled to
notice of and to vote at such Meeting and any adjournment or postponement
thereof.
It is important that your shares be represented and voted at the Meeting.
Accordingly, you are requested to please date, sign, and mail the enclosed proxy
as promptly as possible. Thank you for your cooperation.
By order of the Board of Directors,
/s/ Michael. M. Sullivan
Michael M. Sullivan
Secretary
Huntsville, Alabama
September 30, 1999
Please sign, date, and promptly mail the enclosed white proxy card in the
postage paid envelope provided.
<PAGE>
[PAGE 1 OF PROXY STATMENT]
SCI SYSTEMS, INC.
c/o SCI Systems (Alabama), Inc.
P.O. Box 100
Huntsville, Alabama 35807
PROXY STATEMENT
This Statement is furnished in connection with the solicitation by the
Board of Directors of SCI Systems, Inc. (the "Board" and the "Company") of
proxies to be voted at the Annual Meeting of Shareholders of the Company to be
held at 10:00 A.M., Eastern Daylight Savings Time, on Friday, October 22, 1999,
at The Ritz-Carlton Hotel (Buckhead), 3434 Peachtree Street, N.E., Atlanta,
Georgia 30326 and at any and all adjournments or postponements of the meeting
(the "Meeting"). Enclosed is a proxy card for you to vote your shares. If the
enclosed form of proxy is executed, returned in time, and not revoked, it will
be voted in accordance with the specifications, if any, made by the shareholder.
If specifications are not made, the proxy will be voted (i) for election of the
director nominees named herein, and (ii) for ratification of the selection of
Ernst & Young LLP as the Company's independent auditor as described in this
Proxy Statement. If other matters are properly presented at the Meeting, it is
the intention of the persons designated as proxies to vote on them in accordance
with their best judgment.
Shareholders who execute proxies may revoke them at any time before they
are voted at the Meeting by filing with the Secretary of the Company either an
instrument revoking the proxy, or a duly executed proxy bearing a later date.
Proxies also may be revoked by any shareholder present at the Meeting who
expresses a desire to vote his or her shares in person.
A majority of the shareholders entitled to vote must be present at the
Meeting in person, or represented by proxy, to constitute a quorum and act upon
the proposed business. Failure of a quorum to be represented at the Meeting will
require adjournment and will subject the Company to additional expense. When a
quorum is present an affirmative vote of a majority of the number of shares of
stock present, or represented by proxy, at the Meeting and entitled to vote
shall decide any question brought before the Meeting, unless a different vote is
otherwise required. However, directors shall be elected by an affirmative vote
of a plurality of the shares present in person, or represented by proxy at the
Meeting, and entitled to vote on the election of directors. Abstentions will
have the effect of negative votes with respect to any matter presented at the
Meeting, other than election of directors. Broker non-votes will have no effect
on any other matter presented. If authority to vote for one or more of the
director nominees is withheld on a proxy card, no vote will be cast with respect
to the shares indicated on that proxy card and the outcome of the election will
not be affected.
The Notice of the Meeting, this Proxy Statement, and the form of proxy were
first mailed to shareholders on or about September 30, 1999.
VOTING SECURITIES
At the close of business on September 13, 1999, the record date for
determining shareholders entitled to notice and to vote at the Meeting, there
were outstanding 72,154,437 shares of Common Stock. Each share is entitled to
one vote.
The following table sets forth certain information concerning each person
known to the Board to be a beneficial owner of more than five percent of the
outstanding shares of Common Stock as of December 31, 1998 (the ownership of the
directors and executive officers of the Company being included elsewhere
herein).
<TABLE>
<S> <C> <C>
Name and Address Amount Beneficially Percent of
of Beneficial Owner Owned Class(1)
- -------------------------------------------------------------------------------------
FMR Corporation 9,008,850(2) 15.00%(2)
82 Devonshire Street, Boston, MA 02109-3614
T. Rowe Price Associates, in 7,678,600(3) 12.70%(3)
T. Rowe Price Science and Technology Fund, Inc.
100 East Pratt Street, Baltimore, MD 21202
AMVESCAP PLC 3,341,310(4) 5.56%(4)
1315 Peachtree Street, N.E.
Atlanta, GA 30309
Capital Research and Management Company 3,133,830(5) 5.20%(5)
333 South Hope Street
Los Angeles, CA 90071
</TABLE>
<PAGE>
[PAGE 2 OF PROXY STATMENT]
(1) Stated as a percentage of shares outstanding on December 31, 1998.
(2) Accoring to Schedule 13G dated February 1, 1999 filed pursuant
to the Securities Exchange Act of 1934 (Exchange Act)
(3) According to a Schedule 13G dated May 10, 1999, filed pursuant
to the Exchange Act.
(4) According to a Schedule 13G dated February 8, 1999 filed pursuant to
the Exchange Act.
(5) According to Schedule 13G dated February 8, 1999 filed pursuant to the
Exchange Act.
Ownership of Equity Securities in the Company
The following table sets forth information regarding beneficial ownership
of Common Stock by each director, the Company's five most highly compensated
officers, and the directors and executive officers of the Company as a group as
of September 13, 1999.
Aggregate Number of Shares Percentage of
Name Beneficially Owned Outstanding Shares
- -------------------------------------------------------------------------------
Olin B. King 2,932,877 (1) 4.1%
A. Eugene Sapp, Jr 458,871 (2) *
David F. Jenkins 167,520 (3) *
Peter M. Scheffler 60,921 (4) *
Michael H. Missios 54,849 (4) *
Howard H. Callaway 44,088 (5) *
G. Robert Tod 14,183 (6) *
William E. Fruhan 14,320 (7) *
Jackie M. Ward 11,576 (8) *
Wayne Shortridge 9,874 (9) *
All Directors and Executive
Officers as a group
(18 persons) 4,179,909(10) 5.7%
* Indicates less than 1% of issued and outstanding shares of Common Stock.
(1) Includes 833,500 shares not presently owned by Mr. King but which are
subject to stock options exercisable within 60 days after September 13,
1999.
(2) Includes 334,000 shares not presently owned by Mr. Sapp but which
are subject to stock options exercisable within 60 days after September 13,
1999, and 83,232 owned of record by the Eugene and Patricia Sapp
Charitable Remainder Unitrust.
(3) Includes 157,000 shares not presently owned by Mr. Jenkins but which are
subject to stock options exercisable within 60 days after September
13, 1999, and 6,000 shares owned of record by the David and Christina
Jenkins Family Trust.
(4) Includes 54,200 and 54,400 shares not presently owned by Messrs. Scheffler
and Missios, respectively, but which are subject to stock options
exercisable within 60 days after September 13, 1999.
(5) Includes 2,000 shares owned by Mr. Callaway's spouse, 6,800 shares owned of
record by the Howard H. Callaway Foundation, Inc., 1,940 shares
not presently owned by Mr. Callaway but which are subject to stock options
exercisable within 60 days after September 13, 1999, and 5,248
shares owned through the Company's Directors' Deferred Compensation Plan.
Mr. Callaway is an officer and Trustee of the Foundation and, as such,
shares voting and investment powers with respect to the shares owned by the
Foundation. Nothing in this paragraph should be construed as an admission
by Mr. Callaway of beneficial ownership of the shares owned by his spouse.
(6) Includes 6,143 shares owned by Mr. Tod through the Company's Directors'
Deferred Compensation Plan.
(7) Includes 6,320 shares owned by Mr. Fruhan through the Companys Directors'
Deferred Compensation Plan.
(8) Includes 6,406 shares owned by Ms. Ward through the Company's Directors'
Deferred Compensation Plan.
(9) Includes 6,874 shares owned by Mr. Shortridge through the Company's
Directors' Deferred Compensation Plan.
(10)Includes 1,828,100 shares not presently owned by directors or executive
officers but which are subject to stock options exercisable within 60
days of September 13, 1999, and 36,344 shares owned by directors through
the Directors' Deferred Compensation Plan.
<PAGE>
[PAGE 3 OF PROXY STATMENT]
PROPOSAL 1 - ELECTION OF DIRECTORS
Nominees for Board of Directors
In accordance with the Company's Second Restated Certificate of
Incorporation, the Board is divided into three classes with each class
consisting of, as nearly as possible, one third of the total number of directors
fixed by the Board. The Company's Bylaws provide that the number of directors
shall be not less than three (3) and not more than eleven (11), and that the
exact size of the Board may be fixed from time to time by the Board. The Board
has currently fixed the number of directors at seven, with two directors in
Class I, three in Class II, and two in Class III. Board members serve three-year
terms which are staggered to provide for election of one director class each
year. Class III directors are to be elected at the Meeting.
The Board has nominated and proposes A. Eugene Sapp, Jr. and G. Robert Tod
for re-election as Class III directors, and requests Shareholder approval of the
nominees. It is intended that the proxies will be voted for the re-election of
the two nominees to serve as directors of the Company for a term of three years
and until their respective successors are elected and qualified. The proxies
cannot be voted for a greater number of persons than the number of nominees
named herein. In the event any of the nominees refuses or is unable to serve as
a director (which is not now anticipated), the persons acting as proxies reserve
full discretion to vote for such other persons as may be nominated.
Information About Director Nominees and Continuing Directors
Based upon information supplied by them, the table below sets forth for
each director nominee and continuing director their name, age, positions with
the Company, principal occupation, and business experience for the last five
years, and prior service as a director of the Company.
<TABLE>
<S> <C> <C>
Positions with the Company Director
Name and Age And Principal Occupation Since
- --------------------------------------------------------------------------------------------------
Class III Directors
(Term expiring in 2002)
- -----------------------
G. Robert Tod (2) (3) Formerly, Vice Chairman, CML Group, Inc., Acton, MA, 1981
(60) a specialty marketing company, 1969 to 1998; retired.
A.Eugene Sapp, Jr.(1)(4) President and Chief Executive Officer, SCI Systems, Inc. 1981
(63)
Class II Directors
(Term expiring in 2001)
- -----------------------
Jackie M. Ward (1) (2) Chief Executive Officer, Computer Generation Incorporated, 1992
(61) Atlanta, GA, a provider of turn-key telecommunication
systems products and data processing services to U.S. and
international markets, 1968 to present.
Wayne Shortridge (1)(4) Partner, Paul, Hastings, Janofsky & Walker LLP, 1992
(61) Atlanta, GA, 1994 to present; Partner, Powell, Goldstein,
Frazer & Murphy, Atlanta, GA, 1968 to 1994.
William E. Fruhan (1)(3) The George E. Bates Professorship, Harvard University 1992
(56) Graduate School of Business, Boston, MA, 1979 to present.
Class I Director Nominees
(Term expiring in 2000)
- -----------------------
Olin B. King (4) Chairman of the Board, SCI Systems, Inc. 1961
(65)
Howard H. Callaway (2)(3) Chief Executive Officer, Crested Butte Mountain 1976
(72) Resort, Inc., Crested Butte,CO, a resort complex,
since 1979 to present; Chairman, Callaway Gardens
Resort, Inc., Pine Mountain, GA, a resort complex,
since January 1994 to present.
<FN>
(1) Member of the Investment Committee
(2) Member of the Compensation Committee
(3) Member of the Audit Committee
(4) Member of the Executive Committee
<PAGE>
[PAGE 4 OF PROXY STATMENT]
Certain of the continuing directors and director nominees also serve as
directors of other publicly held companies as follows: Mr. Callaway, CML Group,
Inc.; Mr. King, Regions Financial Corporation; Mr. Sapp, VBand Corporation and
Artesyn Technologies; Mr. Tod, EG&G, Inc., and UST Corp.; and Ms. Ward, TRIGON
Blue Cross Blue Shield, Bank of America, Equifax, Inc., and Matria Healthcare,
Inc.
</FN>
</TABLE>
Meetings and Committees
The Board has standing Executive, Investment, Compensation, and Audit
Committees. The Board does not have a standing Nominating Committee as the
Executive Committee acts as such.
During fiscal year 1999 the Board met seven times; the Executive Committee
seven times; the Investment Committee four times; the Compensation Committee
three times; and the Audit Committee one time. All Board members attended 75% or
more of Board and Committee meetings during the year.
Consisting entirely of outside directors, the Audit Committee is
responsible for reviewing the Company's financial statements, evaluating the
Company's internal financial controls and procedures, and coordinating and
approving the activities of the Company's auditors.
Consisting entirely of outside directors, the Compensation Committee is
responsible for setting compensation guidelines for executives of the Company,
establishing their salaries, reviewing and approving incentive compensation
plans and bonus awards, and reporting all of the foregoing to the outside
members of the Board for approval.
The Executive Committee functions with substantially all of the powers and
duties of the Board; however, the Committee does not have authority to approve
mergers, amend the Certificate of Incorporation or Bylaws, or dispose of all or
substantially all of the Company's assets. The Executive Committee also
functions as the nominating committee of the Company and will consider proposed
directorship nominations if recommended by shareholders in writing to the
Secretary of the Company.
The Investment Committee is responsible for reviewing the investment funds
of the Company and of each employee benefit trust established by the Company and
for directing the investment funds of the Company's Supplemental Retirement
Plan.
During fiscal 1999 the six outside directors were paid an annual fee of
$40,000 plus $1,000 per Board meeting attended and $500 per committee meeting
attended, except that Mr. Shortridge was paid the greater of $1,000 or $300 per
hour for each Executive Committee Meeting attended.
In 1995 the Company adopted a Directors' Deferred Compensation Plan
pursuant to which outside Directors may elect in advance to defer all or part of
their Director's fees in return for stock equivalent rights equal to the number
of shares of Common Stock which he or she could have purchased at the full
market price with the deferred fees. If a Director elects to defer 100% of his
or her fees earned during an entire year, the Director will also be entitled to
additional stock equivalent rights at the full market price equal to 40% of the
deferred fees. The deferred fees and any additional earned stock equivalent
rights are contributed by the Company to a "rabbi trust" which purchases Common
Stock in the open market as the Directors' fees are deferred and holds the
Common Stock in the name of the Director participant. On termination of a
Director's service from the Board for any reason, all stock equivalent rights
earned by the Director pursuant to the Plan will be paid out to him or her by
the trust in Common Stock held in his or her name. The Directors' Deferred
Compensation Plan effectively replaced the directors' stock option feature of
the Company's 1994 Stock Option Incentive Plan (the "1994 Plan").
All outside Directors elected to defer receipt of 100% of their Board fees
for fiscal year 1999 pursuant to the Directors' Deferred Compensation Plan. No
director exercised stock options during the year.
The Board of Directors recommends a vote "FOR" the re-election of the director
nominees named above.
PROPOSAL 2-RATIFICATION OF SELECTION OF INDEPENDENT AUDITOR
Ernst & Young LLP has served as independent auditor for the Company since
1961 and has been selected by the Board of Directors to audit the books and
records of the Company for the fiscal year ending June 30, 2000. The Board of
Directors proposes that its selection of Ernst & Young LLP as the Company's
independent auditor be ratified by shareholders at the Meeting. If the
shareholders do not ratify this selection, the selection of another firm will be
considered by the Board. The Audit Committee of the Board is of the opinion that
the retention of the services of Ernst & Young LLP is in the best interests of
the Company. A representative of Ernst & Young LLP is expected to be present at
the Meeting to respond to appropriate questions and to make a statement if he or
she so desires.
The Board of Directors recommends a vote "FOR" ratification of Ernst&Young LLP
as Auditor for fiscal year 2000.
<PAGE>
EXECUTIVE OFFICERS
Officers of the Company are elected by the Board annually and serve at the
pleasure of the Board. Information concerning certain of the executive officers
of the Company is required by Securities and Exchange Commission Regulations to
be disclosed in this Proxy Statement and is contained in the following Summary
Compensation Table and other tables set forth in this Proxy Statement.
Messrs. Olin B. King and A. Eugene Sapp, Jr. are officers of SCI Systems,
Inc. and/or of one or more of its subsidiaries; all other executive officers are
officers of one or more Company subsidiaries.
[PAGE 5 OF PROXY STATMENT]
Messrs. O. King and Sapp have held various positions with the Company since
1961 and 1962, respectively, and have been Chairman and CEO, and President and
COO, respectively, since prior to 1990 and through June 30, 1999. On July 1,
1999, Mr. O. King relinquished the title of CEO (remaining as Chairman) and was
succeeded as such by Mr. Sapp.
Mr. David F. Jenkins, age 62, joined the Company in 1990 as Vice President.
He was promoted to Senior Vice President, Western Division, in 1991 and
continues in that position.
Mr. Jerry F. Thomas, age 58, has held various positions with the Company
since 1963. In September 1993 he was promoted to Senior Vice President, Central
Region. In 1997 he was appointed Senior Vice President of the newly formed
Computer Systems Division, and in April 1998 to Senior Vice President of the
newly formed Technology Division, the position he currently holds.
Mr. Peter M. Scheffler, age 48, joined the Company as Senior Vice
President, Asian Division, in January 1994. From June 1993 to January 1994 Mr.
Scheffler was Senior Director of Worldwide Manufacturing for Apple Computer,
Inc. In July 1998 Mr. Scheffler was appointed Senior Vice President and
Assistant to the President.
Mr. George J. King, age 43, has held various positions with the Company
since 1978. In 1992 he was elected Vice President and in 1997 was promoted to
Senior Vice President of the Southeastern Division and continues in that
position. Mr. King is the son of Olin B. King, Chairman of the Company.
Mr. Charles N. Parks, age 43, joined the Company in 1988 as Vice President.
In 1997 he was promoted to Senior Vice President of the Mexican Division and
continues in that position.
Mr. LeRoy H. Mackedanz, age 56, joined the Company in 1987. In 1989 he was
elected Vice President and in 1997 was promoted to Senior Vice President of the
Northeastern Division, and currently holds that position.
Mr. W. David Rees, age 53, joined the Company in 1991 as a Program Manager
and was promoted to European Marketing Manager in 1994. He was elected Vice
President, Business Development, European Division, in 1996 and to Senior Vice
President, European Division, in January 1998, the position he currently holds.
Mr. Michael H. Missios, age 57, joined the Company in 1990 as Vice
President, Peripherals and in April 1997 was promoted to First Vice President.
In January 1998 he was promoted to Senior Vice President of the newly formed PC
Division A, his current position.
Mr. C. T. Chua, age 52, joined the Company in 1993 as Vice President. He
was promoted to First Vice President in 1998 and to Senior Vice President, Asian
Division in July 1999.
EXECUTIVE COMPENSATION
SEC regulations require that the Company provide Shareholders the following
general information regarding its executive compensation and detailed
information regarding compensation given to the Company's five most highly paid
officers.
Summary Compensation Table
The following table summarizes compensation given to the Company's five
most highly compensated officers during the last three fiscal years:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Long Term
Annual Compensation Compensation
------------------------------------------------ ------------
Name and Total Securities All Other
Principal Annual Underlying Compensation
Position Year Salary ($) Bonus ($)(a) Compensation ($) Options (#) ($)
-------- ---- ---------- ------------ ---------------- ----------- ------------
Olin B. King, 1999 763,665 1,378,480 2,142,145 90,000 27,492(b)
Chairman & CEO 1998 707,108 1,450,854 2,157,962 100,000 25,456(b)
1997 599,442 1,127,130 1,726,572 100,000 21,580(b)
A. Eugene Sapp, Jr., 1999 502,012 896,012 1,398,024 60,000 18,072(b)
President & COO 1998 476,369 943,055 1,419,424 70,000 17,044(b)
1997 436,919 732,635 1,169,554 75,000 15,729(b)
Peter M. Scheffler, 1999 246,820 188,375 435,195 30,000 4,469(b)
Senior Vice President, and 1998 226,617 83,246 309,863 25,000 266,095(c)
Assistant to the President 1997 208,908 57,298 266,278 24,000 308,891(c)
David F. Jenkins, 1999 251,250 174,175 425,425 20,000 5,917(b)
Senior Vice President, 1998 234,070 192,048 426,118 25,000 6,476(b)
Western Division 1997 216,604 191,201 407,805 30,000 5,198(b)
Michael H. Missios, 1999 201,365 173,706 346,456 20,000 4,832(b)
Senior Vice President, 1998 174,639 185,000 359,639 15,000 4,177(b)
PC Division A 1997 152,685 154,600 307,285 18,000 3,664(b)
<PAGE>
[PAGE 6 OF PROXY STATMENT]
<FN>
(a) The 1999 bonus is an estimate of the amount payable when final accounting
is completed and approved by the Board of Directors.
(b) Amounts represent the Company's contributions to the Company's 401(k) and
Deferred Compensation Plans, which Plans are available to all eligible
employees.
(c) Amounts represent contributions of $2,874 in 1998 and $3,760 in 1997 to the
Company's 401(k) and Deferred Compensation Plans, with the remainder
representing foreign living and car allowances.
</FN>
</TABLE>
Stock Option Grants in Last Fiscal Year
Prior to October 28,1994, the Company granted stock options to executive
officers and other key employees pursuant to its Incentive Stock Option and
NonQualified Stock Option Plans, and after October 28, 1994, pursuant to the
Company's 1994 Stock Option Incentive Plan ("the 1994 Plan"). The Company does
not grant Stock Appreciation Rights (SARs). The following table sets forth
information regarding stock options granted to the Company's five most highly
compensated officers during fiscal year 1999 under the 1994 Plan.
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Potential Realizable
Number of Value at Assumed
Securities % of Total Annual Rates of Stock
Underlying Options Granted to Price Appreciation for
Options Employees in Exercise or Base Expiration Option Term
Name Granted (#) Fiscal Year Price ($/SH) Date 5% ($) 10% ($)
---- ----------- ------------- ------------ ---------- --------- ---------
Olin B. King 90,000 12.21 33.4375 10/23/08 1,892,580 4,796,169
A. Eugene Sapp, Jr. 60,000 8.14 33.4375 10/23/08 1,261,720 3,197,446
Peter M. Scheffler 30,000 4.07 33.4375 10/23/08 630,850 1,598,723
David F. Jenkins 20,000 2.71 33.4375 10/23/08 420,573 1,065,815
Michael H. Missios 20,000 2.71 33.4375 10/23/08 420,573 1,065,815
</TABLE>
The assumed annual rates of appreciation of five and ten percent would
result in the price of the Company's common stock increasing by $21.02 and
$53.29, respectively, by the end of the option term.
Aggregated Option Exercises in Fiscal Year 1999 and Fiscal
Year-End Option Values
The following table summarizes options exercised by the Company's five most
highly compensated officers during fiscal year 1999 and presents the value of
unexercised options held by them at fiscal year end under all stock option
Plans:
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
Number of
Securities Underlying Value of Unexercised
Shares Unexercised Options In-the-Money Options
Acquired Value at Fiscal Year End (#) At Fiscal Year End ($)
Name on Exercise (#) Realized($) Exercisable Unexercisable Exercisable Unexercisable
---- --------------- ----------- ----------- ------------- ----------- -------------
Olin B. King -0- -0- 757,500 190,000 27,634,688 2,527,500
A. Eugene Sapp, Jr. -0- -0- 282,000 130,000 8,495,500 1,717,875
Peter M. Scheffler 24,000 496,600 33,600 53,400 1,162,000 715,463
David F. Jenkins -0- -0- 136,400 48,600 4,416,200 681,862
Michael H. Missios 25,000 1,135,670 40,600 35,400 955,338 493,538
</TABLE>
Supplemental Retirement Plan
The Company's Supplemental Retirement Plan ("SRP") is a noncontributory,
defined benefit pension plan which provides fixed benefits to members upon their
retirement, death, or termination of employment after at least 5 years of
service with the Company or its subsidiaries. The SRP is sponsored by SCI
Systems (Alabama), Inc. ("Plan Sponsor"), a wholly owned subsidiary of the
Company.
All employees of the Plan Sponsor and its participating affiliates are
eligible to participate in the SRP. The SRP provides for a benefit accrual each
year for up to 35 years equal to 1% of employee compensation in excess of
$10,000 and, as of January 1, 1989, 1/2% of the first $10,000. Employee
compensation covered by the SRP is the total compensation that would be subject
to Social Security taxes as actually paid to the employee during a calendar
year, but excluding supplemental compensation awards, subject to a limitation
beginning January 1, 1989. Compensation deferred by participants under the
Deferred Compensation Plan is not included as part of the employee covered
compensation in the year of deferral.
Based on past years' compensation covered by the SRP, and assuming normal
retirement age and a 5.5% annual increase in covered compensation from calendar
year 1999 until retirement, estimated annual benefits payable upon retirement to
the Company's five most highly
<PAGE>
[PAGE 7 OF PROXY STATMENT]
compensated officers are as follows: Mr. O. King, $39,801; Mr. Sapp, $35,302;
Mr. Jenkins, $18,282; Mr. Missios, $25,148 and for Mr. Scheffler, $41,779. These
estimated benefits are subject to the Internal Revenue Code of 1986 (the "Code")
paragraph 415 maximum benefit limitations. These benefits do not reflect the
maximum limitation on includable employee compensation under Code paragrph
401(a)(17) effective for plan years beginning in 1989. The maximum limitation in
1999 is $160,000, subject to cost of living increases as prescribed by the
Secretary of the Treasury.
Compensation Committee Report on Executive Compensation
The Compensation Committee of the Company's Board of Directors (the
"Committee") consists of three Directors who are neither employees nor officers
of the Company. The Committee reviews the Company's executive compensation
program and policies each year and determines the compensation of the officers.
The Committee's recommendations of compensation for the Chief Executive Officer
and the other officers are reviewed with and approved by all the nonemployee
directors, who constitute a majority of the Board.
The Committee's overall policy regarding compensation of the Company's
officers is to provide competitive salary levels and compensation incentives
that attract and retain individuals of outstanding ability; that recognize
individual performance and the performance of the Company relative to the
performance of other companies of comparable size and quality; and that support
both the short-term and long-term goals of the Company.
The executive compensation program includes three elements which, taken
together, constitute a flexible and balanced method of establishing total
compensation for management. These elements are base salary, annual incentive
awards in the form of annual cash bonuses, and long-term incentive awards in the
form of stock option grants.
Base Salaries: The Committee annually reviews and establishes officer base
salaries. Individual salaries are determined by the Committee's assessment of
the individual's experience level, the scope and complexity of the position
held, and the salaries being paid for similar positions in the industry based
upon the Company's knowledge of competitive salaries in the marketplace.
Annual Incentive Program: The goal of the annual incentive, or bonus,
program is to place a significant portion of the officers' and senior managers'
cash compensation at risk to encourage and reward a continued high level of
performance each year. Individual incentive amounts are determined by the
Committee generally based upon profitability of the individual's business unit
and his or her organizational responsibility.
The CEO and COO do not participate in the same annual incentive program as
other Company officers. Annual incentive compensation for Messrs. O. King,
Chairman and CEO, and Sapp, President and COO, is granted pursuant to the
Company's Senior Executive Officer Annual Incentive Plan and is based upon the
Company's annual profits. This incentive compensation has been set for several
years at 1% of the Company's annual net income for Mr. O. King and .65% of
annual net income for Mr. Sapp.
Long-term Incentive Program: Stock options are the basis for the Company's
long-term incentive program. The Company's stock option grants generally are
made at market value at the date of grant and vest over a five year period. This
program links officer compensation to long-term shareholder value and focuses
management attention on Company performance over a period longer than one year.
Stock options are also granted to encourage and facilitate personal stock
ownership by the officers and thus strengthen their personal commitment to the
Company and lengthen their perspective. The Committee's policy is to grant stock
option awards annually, based both upon individual performance and the potential
for the officer to contribute to the future success of the Company.
The Committee believes that the three programs described above provide
compensation that is competitive with the levels paid by major competitors in
the industry; effectively links officer and shareholder interests through
equity-based plans; and is structured to provide incentives that are consistent
with the long-term investment horizons which characterize the business in which
the Company is engaged. In this regard, the Committee draws shareholder
attention to the Total Annual Compensation for Messrs. O. King and Sapp, CEO and
COO, respectively, for the last several years during which their Total Annual
Compensation generally followed overall Company performance.
Chief Executive Officer Compensation: In determining Mr. King's base
salary, annual bonus, and stock option grant in fiscal year 1999, the Committee
considered the Company's overall performance and Mr. King's individual
performance by the same methods described above for Company officer
compensation. The Committee also considered compensation granted to chief
executive officers of other companies in similar industries, as well as
incentives for future performance.
The Committee believes that Mr. King's total compensation as Chief
Executive Officer appropriately reflects his performance and, in turn, that of
the Company in fiscal year 1999. Company results and Mr. King's individual
performance during the year continued to be excellent.
<PAGE>
[PAGE 8 OF PROXY STATMENT]
The Committee does not believe that the compensation of any Company officer
is likely to exceed the nonperformance based $1 million threshold limit of
Section 162 (m) of the Internal Revenue Code.
Submitted by the Compensation Committee of the Company's Board of Directors:
Howard H. Callaway, Chairman
G. Robert Tod Jackie M. Ward
Performance Graph
The following graph sets forth a comparison of the cumulative total Company
shareholder return with those of the Dow Jones Industrial Average ("DJIA") and
the Computer Hardware Subsector of the Hambrecht & Quist Technology Index ("H&Q
Comp Hdw"). Total shareholder return was determined by converting the closing
price of a share of SCI Common Stock ("SCI") at the beginning of the measurement
period (June 30, 1994) to a base amount ($100.00). Cumulative return for each
subsequent quarter-end (assuming reinvestment of all dividends into additional
shares) was measured as a change from the closing price at the beginning of the
measurement period and plotted. The graph assumes $100.00 was invested on June
30, 1994 in the Company's Common Stock, in the DJIA, and in the H&Q Comp Hdw
companies.
Comparative Five-Year Total Returns
SCI Systems, Inc., Dow Jones Industrial Average, and Hambrecht & Quist
ComputerHardware Subsector
(Normalized) Stock Performance Graph
<TABLE>
<S> <C> <C> <C>
DATES SCI Systems,Inc H&Q Computer Dow Jones
Hardware Industrial Average
Jun-94 100.00 100.00 100.00
Sep-94 139.67 119.18 107.81
Dec-94 119.01 136.23 105.78
Mar-95 123.55 140.31 114.70
Jun-95 165.29 175.66 125.69
Sep-95 228.10 189.77 132.11
Dec-95 204.96 196.11 141.16
Mar-96 242.15 192.42 154.13
Jun-96 268.60 206.70 155.99
Sep-96 371.90 229.58 162.27
Dec-96 295.04 260.00 177.88
Mar-97 334.71 268.92 181.61
Jun-97 421.49 316.71 211.66
Sep-97 655.37 443.84 219.18
Dec-97 576.03 353.96 218.16
Mar-98 471.07 419.52 242.75
Jun-98 499.17 449.22 246.95
Sep-98 356.20 495.45 216.35
Dec-98 763.64 680.08 253.28
Mar-99 391.74 707.62 269.96
Jun-99 626.45 763.43 302.64
</TABLE>
COMPLIANCE WITH SECTION 16(a) OF THE SECURITIES EXCHANGE ACT OF 1934
Section 16(a) of the Securities Exchange Act of 1934 requires the Company's
officers, directors, and persons who own more than ten percent of a registered
class of the Company's equity securities to file reports of ownership and
changes in ownership with the Securities and Exchange Commission ("SEC") and the
New York Stock Exchange and to furnish the Company with copies of all Section
16(a) forms they file.
Based solely on transactions reported to the Company and review of the
copies of such forms and any amendments thereto furnished to the Company, or
written representations that no forms were required, the Company believes that
during the year ended June 30, 1999, all Section 16(a) filing requirements
applicable to its officers, directors, and greater than ten percent beneficial
owners were met, with the exception of Charles N. Parks who filed a Form 4
regarding a purchase of Company stock three months late.
GENERAL
Any Shareholder of the Company wishing to submit a proposal at the
Company's year 2000 annual meeting of Shareholders, and desiring the proposal be
considered for inclusion in the Company's proxy materials, should provide a
written copy of the proposal to the
[PAGE 9 OF PROXY STATMENT]
management of the Company at its principal executive office, attention Corporate
Secretary, not later than June 3, 2000, and should otherwise comply with the
rules of the Securities and Exchange Commission relating to Shareholder
proposals. Proxies solicited by the Company for its year 2000 annual meeting
will grant discretionary authority to the Proxies to vote or not vote on any
Shareholder proposal if the Company has not received notice of the proposal by
August 17, 2000. The cost of preparing and mailing the proxies, the accompanying
notices and Proxy Statements, and all costs in connection with solicitation of
proxies will be paid by the Company. In addition to solicitation by use of the
mail, certain directors, officers and regular employees of the Company may
solicit the return of proxies by telephone, telegram or other electronic
methods, or personal interview without additional compensation. The Company has
also retained D.F. King & Co., Inc. to provide routine advice and services for
proxy solicitation for an annual fee of $3,000.00. The Company may request
brokerage houses and custodians, nominees, and fiduciaries to forward soliciting
material to their principals, the beneficial owners of Common Stock of the
Company, and will reimburse them for their reasonable out-of-pocket expenses.
Management does not know of any other matters to be presented at the
Meeting for action by shareholders. However, if any other matters requiring a
vote of the shareholders arise at the Meeting, it is intended that votes will be
cast pursuant to the proxies with respect to such matters in accordance with the
best judgment of the persons acting under the proxies.
If you cannot be present in person, you are requested to please date, sign
and mail the enclosed proxy card promptly. An envelope has been provided for
that purpose. No postage is required if mailed in the U.S.
By Order of the Board of Directors.
/s/Michael M. Sullivan
Huntsville, Alabama Michael M. Sullivan
September 30, 1999 Secretary
<PAGE>
PLEASE DATE, SIGN, AND MAIL THIS PROXY PROMPTLY IN THE ENCLOSED ENVELOPE
This Proxy, when properly executed, will be voted in accordance with the
directions given by the undersigned shareholder. If no direction is made, it
will be voted in favor of Proposals 1 and 2 and will be voted on any
discretionary matters in accordance with the best judgement and discretion of
the Proxies.
Dated:_____________________, 1999
_________________________________
Signature
_________________________________
Additional Signature, if held jointly
Please sign exactly as your name(s) appears hereon. If your shares are held
jointly, each shareholder named should sign. When signing as attorney, executor,
administrator, trustee or guardian, please give your full title as such. If the
signatory is a corporation, please sign the full corporate name by a duly
authorized officer.
SCI SYSTEMS, INC.
This Proxy is solicited on behalf of the Board of Directors of the Company
The undersigned hereby acknowledges receipt of the Notice of Annual Meeting
of Shareholders and Proxy Statement, each dated September 30, 1999, and does
hereby appoint Olin B. King and A. Eugene Sapp, Jr., and either of them, with
full power of substitution, as proxy or proxies of the undersigned to represent
the undersigned and to vote all shares of SCI Systems, Inc. Common Stock (par
value $0.10) which the undersigned would be entitled to vote if personally
present at the Annual Meeting of Shareholders of SCI Systems, Inc. to be held at
The Ritz-Carlton Hotel (Buckhead), 3434 Peachtree Street, N.E., Atlanta, Georgia
30326 at 10:00 a.m., Eastern Daylight Savings Time, on October 22, 1999, and at
any adjournment or postponement thereof, upon the following matters as
specified:
1. Election of Class III Directors
|_| FOR all nominees listed below (except as marked to the contrary below)
|_| WITHHOLD AUTHORITY to vote for all nominees listed below
A. Eugene Sapp,Jr. G. Robert Tod
(INSTRUCTIONS: To withhold authority to vote for any individual nominee, write
that nominee's name in the space provided immediately below.)
__________________________________________________________________________
2. Ratification of selection of Ernst & Young LLP as the Company's auditors
for the fiscal year ending June 30, 2000.
|_| FOR |_| AGAINST |_| ABSTAIN
3. In their discretion, the Proxies are authorized to vote on such other
business as may properly come before the meeting or any adjournment or
postponement thereof.
This Proxy may be revoked at any time prior to the voting thereof.
(PLEASE SPECIFY YOUR CHOICE ON EACH PROPOSAL, AND SIGN AND DATE THIS CARD ON
THE REVERSE SIDE AND RETURN THIS CARD IN THE ENCLOSED ENVELOPE)
